The Japan International Cooperation Agency (JICA) recently introduced a new credit support programme for private companies as well as cooperation possibility between JICA and the Vietnam Chamber of Commerce and Industry (VCCI). Vietnam Business Forum has an interview with Mr MUTARA Osamu, General Director of the JICA Office of Private Sector Cooperation, on this content. Tuan Anh and Hai Yen report.
Mr MUTARA Osamu said the Private Sector Investment Finance (PSIF) is carried out in two forms: lending and capital contribution. JICA will lend up to 70 percent of total capital for investment projects (in Japanese yen) and even 80 percent in some special cases, with an annual interest rate of 2 percent in 20 years, with a grace period for 5 years. In case the project is implemented in equity contribution, JICA will keep at most 25 percent of equity (in Vietnamese dong).
What industries will be allowed to join and receive supports from the programme?
Three groups of enterprises will be lent. The first is companies investing in poverty reduction projects which emphasise the improvement in financial accessibility for the poor: microfinance and SME financing. It also supports business activities that help improve the livelihoods of the poor in accordance with BOP model (Base of the Pyramid). It means that trading and selling products affordable to the poor.
The second is investment in climate change to prevent and mitigate its negative impacts on the poor like reforestation, renewable energy, energy saving projects, etc.
The third is pro-poor infrastructure investment, including infrastructure for the poor, especially education, medical, electrical, water and traffic infrastructures. In addition, the programme also gives priority to growth-driven poverty reduction projects like power, traffic, water supply and water treatment facilities, etc.
I would like to emphasise that PSIF loan procedures are very quick, initiated immediately upon the receipt of requests from private companies, especially without required special guarantee of the Government, and implementers have the right to choose contractors under Vietnamese laws.
How do you assess the likely success of this program in Vietnam?
I think this is a very useful programme for Vietnam. Since this programme was deployed, we have received a lot of requests for capital support from investment projects of Vietnamese enterprises. At present, we are keeping a list of some projects pending for financing, e.g. ESUHAI project, basic working skill and Japanese language training school in Ho Chi Minh City (lent US$2 million), the Duong river water supply project in Hanoi, Long An water supply and utility management project for Long An environment-friendly industrial parks in Ben Luc district, Long An province. Bien Hoa - Vung Tau highway, Phap Van - Cau Gie motorway, Yen Xa water treatment plant (Hanoi) are also on the list.
This programme will have an important contribution to infrastructure development and poverty reduction in Vietnam. I believe that the success of the programme will help build the economic base in Vietnam and support the development of SMEs.
This programme primarily benefits private enterprises while they are widely known for weaknesses in capital, manpower and experience. Does it cause any difficulty for JICA to evaluate projects? What companies must have to participate in this programme?
As I said companies will be lent at an interest rate as low as 2 percent per annum for a period of 25 years, without any value limit. But, it is important that companies must have a financial guarantee. We will use bank procedures. Or in other words, JICA will provide a general loan for a Vietnamese bank like Vietcombank, Vietinbank or ACB and the bank will then sub-lend it.
To be qualified for this programme, companies must confirm their capabilities and market credibility. They must present feasibility projects. Owners of enterprises must be active and ambitious persons. Another required condition is they must have trade ties with Japanese companies.
To my knowledge, JICA had a working meeting with VCCI to seek cooperative solutions to support businesses in the best way?
That’s right. We have worked with VCCI leaders as JICA hopes VCCI to help to find qualified companies for the programme. We greatly appreciate VCCI’s roles, particularly in supporting the private sector. VCCI will be a firm bridge of cooperation between SMEs of the two nations. In the coming time, we will sign cooperation agreements with VCCI to implement this programme.
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